As reported previously, not only are there currently US boots on the ground in the latest geopolitical "anti Al-Qaeda" snafu in Mali, but it turns out a US presence had been secretly in place for many months prior to the recent escalation in French-led hostilities against the western African nation. And while this would likely have opened up numerous media inquiries under any other administration, so far these has been zero interest as to just why the US is "assisting" the French in this latest military deployment of military forces outside of the US: after all, one of the biggest complaints about US spending is that so much of it goes for military purposes (ignoring that all the tax revenues can't even cover just the monthly entitlement spending of the nation). Perhaps one reason is that, at least to date, the general consensus was that since the French operation in Mali is spearheaded and organized by the French, it is also funded by them. As it turns out that is not the case. As Reuters reports, "The U.S. military has flown five C-17 cargo sorties into the Malian capital to help bring a French mechanized infantry unit into the fight against al Qaeda-affiliated militants in the north of the country, Pentagon officials said on Tuesday." But surely the French are paying for these sorties which are there only to help the French, right? Wrong. "Little said the United States had decided not to seek compensation or reimbursement from France for the flights." Luckily, the US is in such a healthy financial position it can afford to not only open one more front in the war against "Al Qaeda", but will sign for the French tab too. With Joe Sixpack's money of course.
The Great Recession had one effect on Americans you don’t hear much about - regular illicit drug use increased by approximately 2.5 million users in 36 months, from 2007 to 2010. The year 2011 (the most recent data available) saw a slight decline to an estimated 8.7% (from 8.9%) of all Americans regularly using illegal drugs, but, as ConvergEx's Nick Colas notes, this is still 19.5 million people who would find it difficult to pass a pre-employment drug test. Drug use and testing does not (of course) explain the still high levels of national unemployment on their own. Issues of cyclical sluggishness and select structural issues still hold the reins here. But as policymakers struggle to keep the country’s unemployment rate on a downward trajectory, it does seem clear that national drug policy and state-level lawmaking are working at cross-purposes. With drug use among the unemployed at levels double their full-time employed peers (17% versus 8%), and marijuana use on a solid uptrend, national drug policy and macroeconomic priorities appear to be on different – and conflicting – tracks.
Nebraska Governor Appoves Alternative Route Of Keystone XL Pipeline: Will Buffett/Obama Give The Green Light?Submitted by Tyler Durden on 01/22/2013 14:01 -0400
One of the more contentious issues in the past year for America's environmentalists was the (successful) blocking of the Keystone XL pipeline over fears that it would contaminate the Ohallala aquifier in the Sandhill region of Nebraska, a major source of groundwater, and an issue over which none other than the president was quite vocal just about a year ago when he killed the idea. At least that was the pre-spun, socially accepted reason (for the real one read below). It is now time to revisit the fate of this critical pipeline following today's news that the Nebraska governor has approved a new route for the pipeline, one which avoids the most sensitive area in the Sandhills. The response from the opponents has not been late in coming: "Governor Heineman just performed one of the biggest flip-flops that we've in Nebraska political history," said Jane Kleeb, executive director of the group Bold Nebraska. And now it will be up to Obama, whose second inauguration speech had a dedicated segment to clean energy, to kill or let it go through. Since the decision will once again be about politics, the outcome is all but certain, but at least it will provide yet another theatrical sideshow to add to all the others emanating from DC these days. After all it is all about distraction.
It would seem that the only 'asset' that finds the weak macro data this morning and deterioration in European sovereigns as a signal for risk-on is US Equities. While early on VIX gapped higher, it has recoupled in a compress-a-thon dragging stocks to the highs of the day as the USD drifts sideways and Treasuries are bid. Whether equity index strength is the long-AAPL hedgers unwinding (as AAPL is down 2% from its opening levels and sub-$500 once again), we can only stare in amusement at the low-volume liftathon that is exciting all around (especially the energy sector as oil hits 4-month highs).
Think you've made it? Consider yourself the BSD in the room? Well, in Davos, only one thing matters and its about color; the color of your badge. From the holographic awesomeness of the elite badge that enable secret elevators (and handshakes) to the less-than-awesome base colors associated with the press that are both follower and enabler of this event; Bloomberg TV's Erik Schatzker, with his tongue somewhat buried in its cheek, exposes what really matters in Davos among the elite of the elite...
Better than expected German confidence and another Spanish auction 'success' was not enough to encourage anyone in the real world to step into European risk assets en masse. It seems good is no longer good; sovereign spreads leaked wider to unchanged on the week, corporate and financial credit spreads are far from the exuberance we see in European stocks; and Swiss 2Y rates pushed back into the negative (after a few days respite in the green) as last night's Open-Yended decision by the BoJ saw little risk-on follow-through. Europe's VIX has pushed higher from the middle of yesterday. Of note, perhaps is the opening gap down (catch down to credit) in stocks today that was bid - but credit did not follow. EURUSD is going out slightly lower at 1.33.
Germany and Japan have a long tradition of cooperating, at least when it comes to various iterations of world war, generically in the conventional sense (and where they tend to end up on the less than winning side). Which is why it may come as a surprise to some that earlier today German politician Michael Meister launched what is now the third shot across Japan's bow in what is rapidly escalating as the most dramatic case of global currency warfare between the world's net exporters (at least legacy net exporters: thanks to Japan's recent political snafus, it has now become a net importer as it is rapidly losing the Chinese market which accounts for some 20% of its exports) which started as long ago as 2010 when it was quite clear that currency warfare is what the insolvent world can expect, before it devolves into outright protectionism, and finally regular war as Kyle Bass explained recently. To wit: “What can Japan’s competitors do?” Meister said today in a telephone interview. “Either we’re all smart and do nothing, or we follow suit and create a spiral that hurts us all.”
Two fundamental beliefs have driven economic policy around the world in recent years. The first is that the world suffers from a shortage of aggregate demand relative to supply; the second is that monetary and fiscal stimulus will close the gap. Is it possible that the diagnosis is right, but that the remedy is wrong? That would explain why we have made little headway so far in restoring growth to pre-crisis levels. And it would also indicate that we must rethink our remedies. Policymakers initially resorted to government spending and low interest rates to boost demand. As government debt has ballooned and policy interest rates have hit rock bottom, central banks have focused on increasingly innovative policy to boost demand. Yet growth continues to be painfully slow. Why? What if the problem is the assumption that all demand is created equal? Put differently, the bust that follows years of a debt-fueled boom leaves behind an economy that supplies too much of the wrong kind of good relative to the changed demand.
If we as a nation, buoyed by Obama's Inauguration preach, expect to compete once again on a global jobs stage (as we noted earlier) then perhaps taking a note from the Chinese employers' handbook will wake a few up to new realities. CTV News reports the Chinese workers are revolting as they demand "the scrapping of the ridiculously strict requirements stipulating that workers only have two minutes to go to the toilet and workers will be fined 50 yuan ($8) if they are late once and fired if they are late twice." Hundreds of Chinese factory orders angry at these policies took labor law into their own hands and held their Japanese and Chinese managers hostage for a day and a half before police broke up the strike. Shanghai Shinmei Electric noted the managers were released unharmed after 300 police officers were called to the factory. As CTV notes, strikes have become more commonplace in China, as factories operating in highly competitive markets try to get more productivity from their labor force; but workers connected by mobile phones and the Internet become more aware of their rights.
So much for the latest "recovery." While everyone continued to forget that in the New Normal markets do not reflect the underlying economy in the least, and that the all time highs in the Russell 2000 should indicate that the US economy has never been better, things in reality took a deep dive for the worse, at least according to the Empire State Fed, the Philly Fed, and now the Richmond Fed, all of which missed expectations by a huge margin, and are now deep in contraction territory. Moments ago, the Richmond Fed reported that the Manufacturing Index imploded from a 9 in November, 5 in December and missed expectations of a 5 print at -12: this was the biggest miss to expectations since September 2009.
Three weeks ago it became clear that in its fight to curb consumer thirst for gold products, India, whose population is the largest single source of gold consumer demand (at least for now, soon to be replaced with China) is losing said fight, after its finance minister made it very clear that "demand for gold must be moderated" leading to a hike in import taxes to 4%. Needless to say, there is no more certain way to increase demand for a given commodity (or gun, ahem US government) than to hint that the government will make its procurement problematic. Sure enough India blamed its record current account deficit on precisely this: the soaring imports of gold as locals revert to a currency far more appreciated and respected than paper, a topic further explained when we showed the exponential surge in gold-backed loans outstanding in India. Indeed, at least in this country, there is one safe and abundant collateral product which, contrary to the US, is as good as money - gold - whose consumer demand in just India and China is shown in the chart below. Combined India and China consumer amount to some 35% of total gold demand, and 55% for just jewelry. And while we have tracked the relentless gold gross import surge into China, we have not done the same with India, because we assumed these were implied. It is precisely the importing of gold that India is once again doing its best to curb, this time by boosting import duties on gold dore bars by a 150% from 2% to 5%, a day after it once again hiked gold import taxes, this time by 50% from 4% to 6%.
After dropping for the past two years, global unemployment is on the rise again according to the International Labor Organization, a UN jobs watchdog. 2013 is expected to top 200 million unemployed for the first time with the epicenter in the advanced economies as 28 million jobs have been lost since the onset of the crisis. Critically, for the globalists, they unsurprisingly note that macro imbalances have been passed on to the labor market to a significant degree. Moreover, some 39 million 'discouraged' people have dropped out of the labor market as job prospects proved unattainable, opening a 67 million global jobs gap since 2007. However, regions that have managed to prevent a further increase in unemployment have experienced a worsening in job quality, as vulnerable employment and the number of workers living below or very near the poverty line increased. "These are people who,... have given up hope, ...and therefore they are not counted as unemployed but more as discouraged."
- "My adversary is the world of finance."
- "I don't like indecent, unearned wealth."
- "We do not believe that in this country, freedom is reserved for the lucky, or happiness for the few."
- "We cannot succeed when a shrinking few do very well and a growing many barely make it."
- "People from all backgrounds and political positions are willing to contribute for services and protection of society as a whole - but on the condition that money is being spent effectively and that everyone is paying their part."
- "We find ourselves in a difficult situation... There's a crisis, weak growth, unemployment... my duty is to ensure that by the end of my mandate (the country) is in a better state than it was at the beginning."
Just because it has been a while since the ponytailed Swiss pundit's cheerfulness graced these pages, here is a reminder that things can always be worse:
- FABER: `I'M HYPER BEARISH, SOMETIMES WANT TO JUMP OUT WINDOW'
- FABER: `PLACE FOR KEYNESIANS IS NORTH KOREA'
Dr. Gloom, Boom and Doom: consistent to the very end.
While in some places crushing your currency is a badge of honor for every formerly independent central banker (and now merely an operative of the fourth branch of government), this appears to not be the case in Iran. Because after having done what western central bankers can only dream of, and destroying the Iranian real by so much it nearly led to the onset of hyperinflation in the troubled country (and inflating away all that sovereign debt, oh wait, wrong insolvent country), the governor of the nation's central bank, Mahmoud Bahmani, was summarily dismissed. And while the move is obviously politically motivated, and the reason given is that he ordered "illegal withdrawals of money from the banking system", or a process better known in the US as POMO, it is rather stunning how gaping the double standard is vis-a-vis central bankers around the world. Fear not Mahmoud - we are certain that Ben Bernanke will have a vice chairman spot open just for you, or at least a Vice President of Market Manipulation and Leaking on the Liberty 33 trading desk, if and when you manage to escape the clutches of Iran and make your way to the Marriner Eccles building. Now where is that Argo 2 - the Sequel film crew...